4.3 Prepayments, Recurring Invoices, Credit and Debit Memos

These three flows appear in hands-on items because each has a precondition that is easy to miss: full payment and settlement date for prepayments, a Payables calendar for recurring invoices, and the correction type for memos. They fall under Describe Supplier Invoices processing.

Prepayments

A prepayment is an invoice of type Prepayment. It pays a supplier in advance and is applied to later invoices to reduce the amount due.

Temporary or permanent

Oracle states that a permanent classification can't be reversed. To make one temporary, cancel any payment workflows, cancel the prepayment, and create a new one with Allow prepayment application enabled.

Preconditions for applying

• Fully paid. Oracle says you must fully pay a prepayment before you can apply it. A partly paid prepayment still shows Unpaid on the invoice workbench and can't be applied to an invoice or expense report.
• Settlement date reached. The invoice option Settlement days is added to the system date to give the settlement date. You can't apply a prepayment until on or after that date.
• Same PO. If the prepayment is matched to a PO, the invoice it is applied to must have at least one line matched to the same PO. PO quantities are updated when the prepayment is applied.
• Same invoice currency. The prepayment and the invoice must have the same invoice currency. They can be paid in different payment currencies, for example invoice in USD paid in CAD, and prepayment in USD paid in RUB.

The invoice option Show available prepayments during invoice entry reminds clerks that a prepayment is waiting. Use distribution from purchase order builds the prepayment account from the supplier's prepayment natural account and the PO's other segments.

Inclusive or exclusive application

• Exclusive. The usual case. Applying the prepayment reduces the invoice's unpaid amount, and a prepayment application line with its distributions is added.
• Inclusive. Use it when the supplier has already deducted the prepayment and its tax on the invoice. Select Included on Invoice when applying.

A mistaken application can be unapplied, which makes the prepayment available again.

Accounting walkthrough

If tax rates changed between the prepayment and the invoice, the difference can go to the Prepayment Tax Difference distribution (section 3.1).

Under budgetary control, validating the prepayment consumes budget on the prepayment account. Applying it and revalidating releases those funds. Oracle's example: a USD 100 prepayment applied to a USD 300 invoice gives a net consumption of USD 200.

The Prepaid Amount variance hold is placed when the prepaid amount, including tax, is more than the invoice amount. It allows accounting but can't be released manually: unapply the prepayment and apply a smaller amount.

If withholding is calculated at invoice validation, apply the prepayment before validating. Withholding is then calculated net of the prepayment (section 7.3).

Recurring invoices

For regular non-PO charges such as rent, use the Create Recurring Invoices task on the Invoices landing page. It opens a spreadsheet connected to the application. Oracle's rent example:

Click Create Recurring Invoices, review the Template Row Status, then validate the invoices from Manage Invoices or with the Validate Payables Invoices process.

This is one reason Payables calendars exist separately from accounting calendars (section 8.1). If a recurring invoice falls in a Payables period that is Never Opened, it gets a closed period hold. After you open the period, validation releases the hold.

Credit and debit memos

Both reduce what you owe the supplier:

• Credit memo: the supplier sends you a credit document.
• Debit memo: you record the credit yourself because the supplier doesn't send one, for example for goods you returned.

Either can be matched to the original invoice, PO or receipt, or entered with distributions or a distribution set. For PO-matched corrections, choose the type:

• Price correction: a credit or debit memo for a price decrease. It doesn't change the billed quantity on the PO.
• Quantity correction: a credit or debit memo. It changes the billed quantity, not the unit price.
• Amount correction: for unmatched invoices or services POs.

Under budgetary control, a credit memo reverses the charges of the invoice it credits, so validating it increases available funds. Credits also affect payment selection: the PPR option Apply credits up to zero amount payment lets credits offset invoices down to a zero payment (section 7.1).